If the Grinch spared your Christmas this year, just wait 12 months. President Reagan is threatening to veto a bill that would prohibit manufacturers from dictating to retailers how much they can charge for merchandise. If the bill bites the dust, it could drive discount stores out of business.
The way it stands now, if you shop around from upscale department stores to downscale factory outlets, you can find many items on your Christmas list in a range of prices. But the Justice Department thinks it is right and legal for the manufacturer to set a price for both stores.
The practice is called "vertical price fixing," and here's how it works.
A higher-priced store, stung by competition from a discounter, runs to the manufacturer and asks to have mandatory retail prices set in stone. Goodbye, suggested retail price.
If the high-priced store moves enough merchandise to carry some weight with the manufacturer, the manufacturer will set the price and take the chance of offending the discounter. Anyone who undersells that price is cut off from the supply.
From 1911 until seven years ago, when Reagan took office, the courts held that vertical price fixing was taboo. But under Reagan, the Justice Department has argued that the arrangement is legal, and the courts seem to be coming around to that point of view. Also, big business has been lobbying Congress, trying to convince lawmakers that vertical price restraints are one way manufacturers have of controlling the way their products are distributed and showcased, and ought to be practiced universally.
Consumer groups want a law that bans vertical price fixing.
"That's a policy that would make the Grinch proud," said Michael Waldman of Congress Watch. "Prices would rise and competition would shrink."
To get an idea of just how expensive Christmas would be without discount stores, Waldman's group compared prices for Christmas gifts at various stores during late November and early December and shared the information with our associate Stewart Harris.
A game of Monopoly was $16 at F.A.O. Schwartz and $8.96 at K-Mart. The price for Levis 501 button-fly jeans ranged from $18.75 to $32. Books were priced as much as 35 percent less by a Washington-area discounter, and men's briefs could be purchased for almost half price. Congress Watch found that bargain hunters could save as much as 30 percent on electronic goods, toys and games, and 36 percent on clothing.
The bill has passed the House, sponsored by Reps. Peter W. Rodino Jr. (D-N.J.) and Henry J. Hyde (R-Ill.) and is moving to the floor of the Senate under the sponsorship of Sen. Howard M. Metzenbaum (D-Ohio). If it passes there, it will go to the president, along with a recommendation from the Justice Department that he spike it.
The law, according to the Justice Department, would discourage the introduction of new products and flies in the face of a 1984 Supreme Court decision that gave manufacturers the go-ahead for vertical price restraints.